Corporate Governance and Firm Performance: A Review of Theories and Models

Abstract

The need for good corporate governance derives from expectation gap when the behaviours and goals of managers and other employees fall short of those of their principals and other stakeholders. In view of this, several theories and models have been put forward to explain the relationship among the parties and how their conflicting views, goals, behaviours and actions should be aligned to achieve the ultimate goal of the owners of the firm – value maximisation. This study provides elaborate perceptions into the most prominent theories and models that underpin studies relating governance mechanisms and corporate performance. Thus, academic researchers as well as students can, depending on their research objectives, use, build up or develop their theoretical underpinning(s) from these thorough frameworks.