Abstract
Agency theory predicts that the Chief Executive Officer (CEO) and the chairman positions should be held by different individuals in order to protect shareholder’s interest. Though there are mixed evidences on CEO duality and firm performance, most research have found that there is negative relationship between CEO duality and firm performance. Although, in the last decades of the twentieth century, agency theory became the dominant force in the theoretical understanding of corporate governance, it does not however cover all aspects of corporate governance. This paper aims to explore whether it is better to combine various theories in order to describe effective and good corporate governance or theorizing corporate governance based on one theory only. This will cover corporate governance theories which include agency theory, stakeholder theory, stewardship theory, and institutional theory.
Highlights
Modern business environment is changing in haste and it is forcing management and organizations to develop ethical responsibility, modern and profitable businesses
Though there are a number of theories related to corporate governance, the evolution of agency theory, stakeholder theory, stewardship theory and institutional theory explain the Chief Executive Officer (CEO)/chairman duality, audit committee and the role of management most
These four theories are considered as the fundamental theories of corporate governance
Summary
Modern business environment is changing in haste and it is forcing management and organizations to develop ethical responsibility, modern and profitable businesses. Corporations didn’t limit their existence just within the developed nations rather they extended their reach to around the world depending on their size and capabilities Existence of such powerful and leading organisations influences in various aspects such as the economies and socio cultural landscape of country. Shareholders’ value is significantly affected due to these scandals Besides this emergence of technological era has accelerated the globalisation, which decline the governmental control. This paper aims to investigate whether it is better to combine more than agency theory in order to present a comprehensive theoretical overview of good corporate governance or corporate governance based on one theory only In this vein theories going to be covered in this study include agency theory, stakeholder theory, stewardship theory and institutional theory
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