CORPORATE GOVERNANCE AND FIRM PERFORMANCE

Abstract

This study investigates the relationship between corporate governance and firm performance. Considering the growing significance of successful corporate governance to sustainable growth, and the importance of investor confidence, this relationship becomes extremely relevant in relation to stakeholders. This research is quantitative in nature that uses sample of stock exchange companies operating in different industries to analyze the data. The study uses regression analysis to investigate the influence of board structure, executive compensation and shareholder rights on measures of corporate performance (e.g. ROA, market value). It has been found that stronger corporate governance, conducted through independent boards and well-established compensation packages, has an positive impact on firm performance. On the other hand, the research also notices that governance practices may take different effects on industry and firm scale. These results have important implications for both regulators and firm managers interested in the significance of governance on firm value. The research highlights the demand for sector-specific governance that is targeted at varying needs of sectors.’

Keywords: Corporate Governance, Firm Performance, Board Structure, Executive Compensation, Shareholder Rights, Firm Value