Do corporate governance practices affect the performance of firms listed on the Ghana Stock Exchange?

Paul Adjei Onyina,Daniel Kojo Gyanor

doi:10.22495/cocv17i1art10

Paul Adjei Onyina, Daniel Kojo Gyanor

Open Access

https://doi.org/10.22495/cocv17i1art10

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Abstract

This paper investigates whether the performance of a firm matters if it has strong corporate governance practices and listed on the Ghana Stock Exchange. It uses annual financial statements between 2007 and 2016 from firms that have been certified by the Security and Exchange Commission and listed firms on the Ghana Stock Exchange. By means of the random effects model, the study does not provide statistically compelling evidence that listed corporate governance variables affect the performance of firms listed on the Ghana Stock Exchange. However, the study found weak evidence in favour of board size, leverage, firm size, growth, and asset tangibility. We find that many of the corporate governance variables used in the model have no significant impact on the performance of the firms. The relevance of the study is that it shows the relationship between policies on corporate governance and performance of firms, and governing bodies of firms informed about the type of corporate governance practices that will support business performance. Hence we recommend that policymakers take this up to embark on rigorous modification of practices on corporate governance involving listed companies in Ghana to ascertain first-hand how these firms are practising what has been documented in their annual reports

Highlights

Corporate misconduct could be costly, both financially and non-financially. Karpoff, Lee, and Martin (2008b) estimate that on average, firms lose about 38 per cent of their market value whenever corporate misconduct becomes publicly known
This paper investigates whether the performance of a firm matters if it has strong corporate governance practices and listed on the Ghana Stock Exchange
The pursuit of utility maximisation could lead to misalignment of goals among the owners and agent; where directors ensure that their own interests do not conform with those of the owners (Jensen & Meckling, 1976; Smith, 1776; Trabelsi, 2009), and Rejeb and Missaoui (2019) found that chief executive officer (CEO)-duality and price earnings-ratio have significant effect on return on assets

Summary

INTRODUCTION

Corporate misconduct could be costly, both financially and non-financially. Karpoff, Lee, and Martin (2008b) estimate that on average, firms lose about 38 per cent of their market value whenever corporate misconduct becomes publicly known. The opportunity for corporate misbehaviour in corporate entities emanates from the separation of powers amid owners as well as managers, popularly referred to as the agency relationship. It is a situation whereby owners (principal) involve other people to execute some responsibilities on their behalf by assigning some aspect of policymaking power to the representative (Jensen & Meckling, 1976). The rest of the study is structured as follows: a review of literature related to best corporate governance practices and its effects on firms is discussed . This is followed by the methodology and data used. Analysis of data and discussions of results follow, and a presentation of final remarks is given in the concluding section

LITERATURE REVIEW

DATA AND DATA SOURCE

ESTIMATION STRATEGY AND DISCUSSIONS

Findings

CONCLUSION