Corporate Governance and Financial Performance

PurposeThis study aims to investigate the relationship between corporate governance (CG) and financial performance in the case of publicly listed companies in Vietnam for the period from 2019 to 2021. The topic is crucial in understanding how effective governance practices can influence the financial outcomes of companies. The study sheds light on the link between CG practice and firm financial performance. It also provides insights for policymakers and practitioners to improve CG practices.Design/methodology/approachDue to the potential dynamic endogeneity in CG research, this study uses the generalized system methods of moments to effectively address the endogeneity problem. Financial performance is measured by Tobin’s Q, return on equity (ROE) and return on assets (ROA). Based on organization for economic cooperation and development (OECD) standards, these indices were calculated to assess the influence of CG practices on corporate financial performance, namely, for accounting information (ROA and ROE) and market performance (Tobin’s Q and service à resglement différé (SRD) – stock price volatility) for the period 2019–2021. In addition, the study examines the relationship between changes in the CG index and changes in financial performance.FindingsThe study’s main objective is to determine the relationship between CG performance scores and financial performance. The study found a positive relationship between transparency disclosure and financial performance and a positive correlation between CG and company size. The COVID-19 pandemic caused a decrease in transparency and information index scores in 2021 compared to 2019 and 2020 due to delayed General Meetings of Shareholders. The study failed to find a relationship between shareholder rights index (“cg_rosh”) and board responsibility (“cg_reob”) and financial performance, concerning which the findings of this study differ from those of previous studies. Reasons are put forward for these anomalies.Originality/valuePolicymakers need to develop a set of criteria for assessing CG practices. They also need to promulgate specific regulations for mandatory and voluntary information disclosure and designate a competent authority to certify the transparency of company information. The study also suggests that companies should develop CG regulations and focus on regulations relating to the business culture or ethics, as well as implementing a system to ensure equal treatment among shareholders. The study found that good CG practices can positively contribute to a company’s financial performance, which is crucial for investors to evaluate the quality of CG practices for each listed company so that investment risks can be limited.

This study aims to examine the relationship of Corporate Governance and Financial Performance with Intellectual Capital as a mediating variable with a sample of companies included in the chemical industry sector basis and the period of 2012 - 2014. The sampling method used in this research is purposive sampling. The data analysis procedures, structural equation modeling (SEM) with PLS Warp 4.0. The test results showed Corporate Governance affect the ROA. The greater the Corporate Governance further enhance the financial accountability of the company. Corporate Governance does not affect the Intellectual capital. Intellectual Capital affects the financial performance. Value added intellectual capital plays an important role in the performance of financial support the use of physical assets (fixed) to contribute to the company's performance. Although the model fit, but the results of the analysis of intellectual capital does not mediate the relationship Corporate Governance and Financial Performance. Suggestions for further research can be done in other sectors. It is quite possible in the banking sector, as it has done in several countries where the corporate governance affect the Intellectual capital.

The purpose of this research paper is to explore the connection between Corporate Governance, Environmental, Social and Governance (ESG), Audit Committee (AC) and Financial Performance in European Investment Holding Companies. This paper aims to understand whether there is a correlation between these elements. The study answers the following research question: "What is the impact of corporate governance indicators, ESG and financial performance on investments in public holding companies in Europe?" Our findings reveal significant correlations between corporate governance structures and financial performance metrics, as well as the influence of ESG ratings on financial performance and corporate governance. Additionally, we identify the effects of audit committee characteristics on financial performance and ESG outcomes. The reported data is collected from a sample of companies included in the Refinitiv Eikon Database and analysed using a panel data analysis at both regional and industry level. The sample is composed of 228 European Companies, covering a period of 4 years, from 2019-2022. I chose this because it includes the impact of the pandemic and the post-pandemic recovery period, providing insight into the adaptability and resilience of companies in the face of major economic challenges.This research contributes to a deeper understanding of the dynamics between corporate governance, ESG practices and financial performance, providing valuable insights for investors, managers and regulators aiming to navigate sustainable investment strategies in the European market. This sample is considered large enough to provide meaningful data and draw relevant conclusions. Companies from various European countries were included to reflect the diversity of the market and to analyse variations in governance and ESG practices in different national contexts. The focus on public holding companies provides a specific perspective on how these entities manage corporate governance and ESG, given their importance in the European economy. The selection of the sample was based on the availability of financial and corporate governance data to ensure the reliability and validity of the analysis. This data will be used to investigate how governance and ESG practices influence companies' financial performance, thus providing important insights for understanding the relationship between these aspects within the European market.

Corporate governance is one of the critical issues that lead to improving the business environment. Corporate governance not only values firm managers interested in knowing the quality level and corporate governance structure and its adjustment with the best methods and regulations but also is attractive for participants in the market who are interested in knowing governance risk in firms. On the other hand, the major role of financial reporting is to transfer data to outsiders in an organization efficiently. Any business unit works within a field through which the result of performances could be studied and assessed and measured through different methods. Also, the main goal of most firms is to create value for shareholders and to maximize it by using managerial decisions. Methodology: The present study is going to investigate the relationship between corporate governance, financial management decisions, and the financial performance of firms. The statistical sample used in the present research includes 76 enlisted in the Tehran Stock Exchange during the time period between 2010 and 2014. The dependent variable in this research is firm performance. The independent variables whose effect on firm performance is going to be investigated include corporate governance elements (ownership percentage of institutional investors, ownership concentration, the board size, the proportion of not in charge board members), financial management decisions (over-investment, sub-optimal investment). Results: The intended data were collected and were categorized in an axel file as data references. Also testing the hypotheses was carried out by using multiple variable regressions based on pooled data techniques by using Eviews economic measurement software. Conclusion: Research findings showed that there has been a negative and meaningful relationship between ownership percentage of institutional investors and financial performance with a probability of %95. Also, there has not been a meaningful relationship between board size, the proportion of not in charge board members (independence of board), and financial performance. On the other hand, there has not been a meaningful relationship between over-investment and financial performance. But there has been a positive and meaningful relationship between sub-optimal investment and a firm’s financial performance.

Prior studies using an index of corporate governance to explore the relationship between corporate governance and firm performance have found a positive linkage between the two that is better governed firms exhibit better financial performance. Following the seminal work of Gompers et al. (2003. Quarterly Journal of Economics, Vol. 118, No. 1, pp. 107–155) of creating a Corporate Governance Index (CGI) to study the relationship between corporate governance and firm performance, similar studies have been reported not only from developed markets like Germany, Canada, Hong Kong, Switzerland and Australia, but also from emerging markets like Ukraine, Russia, Greece, Thailand and India. In the present study, we investigate the relationship between corporate governance and firm performance in the Indian context by constructing a Corporate Governance Index (CGI) based on internal and external corporate governance mechanisms. Further, we use value-based performance measure-Economic Value Added (EVA), as the primary metrics to measure firm performance. Besides EVA, traditional measures such as Return on Net worth (RONW), Return on Capital employed (ROCE) and Tobin's Q have also been used to evaluate the linkage between corporate governance and firm performance. Using various econometric techniques, we conclude that there is a positive relationship which exists between corporate governance based on the CGI and firm performance, when the performance is measured in terms of the value-based performance tool-EVA. The relationship could not be validated for the traditional performance tools-RONW, ROCE or Tobin's Q.

This study adds to the literature on corporate governance and corporate financial performance by assessing theeffect of board composition on the financial performance of listed firms in Ghana. Using a static panel regressionmodel, the results show that contrary to the agency theory, inside directors tend to have a positive and significanteffect on corporate financial performance whilst outside directors have a negative but statistically insignificanteffect on corporate financial performance of the listed firms in Ghana. In addition, it was found that the existenceof nomination committees tend to have a negative effect on corporate financial performance of listed firms inGhana. The study recommends that listed firms in Ghana should look at how to continuously empower insidedirectors to be able to perform their work well instead of bringing in more outside directors to check them.Moreover, the nomination process of board members must be made transparent to achieve the objective ofrecruiting competent and ethical minded executives to the board. Guidelines for executive recruitment to theboard must be established and if possible the nomination committee must employ the services ofexecutive-hunting agency which would assist the committee in the recruitment process.

The Healthcare sector companies are veritable investment companies on the Nigerian Stock Exchange. The study aimed to investigate the effect of corporate governance and financial performance of listed healthcare sector companies in Nigeria. It employed the ex-post facto research design and equally used secondary data generated from the annual report and accounts of all eight (8) sampled listed healthcare sector companies in Nigeria from 2008 to 2019. The sample size was arrived at by using a purposive sampling technique. The study analysed the data using least square, descriptive and covariance techniques. It adopted Tobin-Q as a measure for firm financial performance, whereas corporate governance variables include board size, board independence and managerial ownership. From the empirical results, the study concludes that there are some level of significance between financial performance and two out of the three corporate governance variables (board independence and managerial ownership). However, the correlation result shows no relationship among the variables examined. The study, therefore, recommends that companies in the healthcare sector should as a matter of necessity embrace complete compliance to corporate governance structure in order to attract the tremendous benefits and improve corporate financial performance therein. This could be done simultaneously with the governance structure at the district, state or hospital level to achieve greater performance. More so, further studies could examine other corporate governance variables together with the already examined variables in this study. Other financial performance variable could also be employed to ascertain any relation or significance among them for the healthcare sector companies.

Previous studies in the literature review that dealt with corporate governance have recently witnessed significant growth that led to some new trends. The purpose of the current paper is to significantly contribute to such trends through investigating and analyzing the effect of corporate governance mechanisms on firm’s financial performance for a sample consisting of industrial and service companies in Jordan. The current study examined cross sectional data through 109 companies (industrial and service companies). The study uses the annual reports for the fiscal year 2011 of the most active Jordanian companies in order to examine the predictions of corporate governance effects on financial performance. This cross sectional study tested all hypotheses of the study and used statistical software, SPSS 20, to analyze data. The findings indicated that board size has a negative association with firm financial performance. Furthermore, the empirical investigations for the current study revealed that the presence of independent directors in the board is not associated with financial performance. Likewise, the result showed that CEO duality has no impact on firm financial performance. From developed and developing countries’ perspective, the current paper uniquely contributes to the literature that dealt with corporate governance and firm performance throughout introducing a market share variable as a measurement to represent firm’s financial performance. In doing so, the paper is the first of its kind to provide new insights on the relationship between corporate governance and firm performance. It therefore provides a new indicator considered as extending for prior research in this discipline as, to the best of researcher’s knowledge; no prior work has been done in both developed and developing economies including Jordan. The study provides empirical evidence to the academic, policy makers and all beneficiary parties of stakeholders in the Middle East, specifically Jordan.

EUGENE FAMA and Michael Jensen's treatment of the "Separation of Ownership and Control" is both insightful and informative. It deepens our understanding of corporate control, and the analysis of residual claimants usefully extends the economics of internal organization to include partnerships, mutuals, nonprofits, and the like. The basic argument is this: specialized governance structures arise in response to the efficiency needs of each type of organization. This is an important argument and one with which I broadly concur. They couple this, however, with a strong suggestion that these structures have reached a high degree of refinement-on which account there is not now, if indeed there ever has been, an organization control problem with which scholars and others are legitimately concerned. On this point I have grave doubts. My discussion of the paper addresses three issues: What is the relation, if any, of the hierarchical organization of the firm to economic performance? What relation, if any, does residual claimant status have to the composition and character of the board of directors? And is there now or has there ever been a corporate control problem? I deal with each of these issues in order.

This research explores the influence of good corporate governance and financial performance on sustainability report disclosures, with company size considered as a moderating factor. The study targets mining companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2023 period. The governance indicators analyzed include the presence of a board of directors, audit committees, and independent commissioners. By utilizing secondary data and a purposive sampling method, a total of 20 mining firms were selected for evaluation. The findings demonstrate that both the board of directors and profitability significantly and positively contribute to the level of sustainability disclosures. In contrast, the audit committee and independent commissioners do not exhibit a notable impact. Furthermore, company size is found to strengthen the relationship between the board of directors and profitability with sustainability reporting, although it does not have a moderating effect on the roles of the audit committee and independent commissioners.

Corporate governance plays a vital role in creating a corporate culture of consciousness, transparency, and openness. This study examine the short run effect of corporate governance on Ghana SIC’s financial performance. The study employs the Autoregressive Distributed Lag (ARDL) technique to investigate the multifaceted relationship between corporate governance and the financial performance of SIC (Sampled Industrial Company). Using time-series data spanning from 2017 to 2021, the study examines the short-term impacts of corporate governance on SIC's financial performance while considering the influence of a control variable, firm size. The dependent variables in this analysis were return on assets, while the independent variables encompass board size, board composition, and CEO tenure at SIC. The control variable utilized was firm size. To assess the hypotheses, regression analysis was conducted, resulting in the identification of short-run equilibrium relationships among the variables. The study found board size and board composition insignificant influence on SIC's financial performance. However, CEO tenure at SIC was statistically significant negative effect on financial performance of SIC insurance companies in Ghana. Moreover, when considering the control variable, firm size demonstrates a highly significant negative impact on return on assets at SIC in the long run. The findings of this study provide valuable insights into the complex interplay between corporate governance and financial performance, shedding light on the nuanced effects of board size, board composition, CEO tenure, and firm size on SIC's financial outcomes. The current study is considered as a battery for further research and studies in the context of corporate governance and financial performance

Purpose: The purpose of this research is to examine the relationship between carbon emissions disclosure as an intervening variable between corporate governance, capital expenditures, and financial performance. Method: Companies listed on the Indonesia Stock Exchange (IDX) that are involved in manufacturing are the primary focus of the study. The research employs a purposive sampling technique to select 16 organizations, resulting in 80 data observations spanning the period from 2019 to 2023. The correlations among variables are examined using path analysis, which is conducted with IBM SPSS Statistics 26. Findings: Gender diversity on boards has a favorable effect on a company's bottom line, according to the study's results. The business's financial performance is negatively affected by the size of the audit committee. Carbon emissions disclosure, on the other hand, is unaffected by factors like board size, gender diversity, or audit committee size. Capital spending, board size, and disclosure of carbon emissions do not substantially affect the financial success of firms. Carbon emissions disclosure also does not mediate the relationship between boards' size, gender diversity, capital spending, audit committee size, and business financial performance. Novelty/Value: This study provides insights into the limited role of carbon emissions disclosure as a mediator in corporate financial performance, highlighting the complex interactions between governance factors and sustainability reporting, especially on carbon emission disclosure.

This study aimed to investigate the effect of corporate governance (CG) to state-owned enterprises (SOEs) performance before and after privatisation. The data consisted of primary data obtained through questionnaires, followed by focus group, and secondary data sourced from published annual reports of SOEs. This research gathered 94 observations of firm-year of SOEs listed in Indonesia. Multiple linear regression was employed to analyse the effect of the CG index on the financial performance, and paired sample t-test to test the performance before and after privatisation. The result shows that the CG index has a positive effect on the financial performance of SOEs. Furthermore, SOEs exhibited improved financial performance after privatisation. Accordingly, the government of Indonesia should selectively choose SOEs for privatisation to achieve the optimum results of privatisation in accordance with the priorities imposed by the government as the primary owner.

Corporate Governance and Firm Performance in Kuwait

PurposeThe study delves into the role of financial literacy in addition to entrepreneurial competencies in the performance of the SMEs of developing economies. It also focuses on how corporate governance may have a moderating effect in enhancing these competencies toward their impact on SME success.Design/methodologyA cross-sectional quantitative research design was adopted for the study. The data was collected from 213 SME owners in Ghana through a structured questionnaire. Stratified random sampling was used to ensure that the sample is representative across sectors, whereas the relationships between the constructs of financial literacy, entrepreneurial competencies, corporate governance, and SME performance was analyzed partial least square structural equation modeling.FindingsThe results indicate that financial literacy and entrepreneurial competencies are significantly related to SME financial performance. The effects are moderated by corporate governance, which in turn enhances the likelihood of improved financial performance.LimitationsThe research focused on one developing economy—that of Ghana—which may limit the generalizability of the findings.Practical implicationsIn fact, these findings reinforce the notion that policymakers and owners of SMEs should focus on financial literacy, entrepreneurial skills, and governance practices to improve the financial performance of their businesses.Originality/valueThe study examines the combination of financial literacy, entrepreneurial competences and corporate governance to predict SMEs performance where research is currently inadequate in the study context. This study also provides a valuable contribution to examining the emergent economies corporate governance role as a moderator that adds depth to extant understanding of the drivers of SME financial performance.