Does Corporate Governance Enhance Firm Performance?: An Empirical Literature Evidence

Abstract

This paper is a review of the empirical literature evidence on whether corporate governance actually enhances firm performance. The notional view is that the quality of performance of firms very much depends on the quality of their corporate governance. By this view it is believed that without good governance no firm can do well and when firms don’t do well their contribution to the economic development of their nations would either diminish or become zero.This work finds that there appears not to exist, among current empirical literature, what can amount to a consensus on whether corporate governance, as a cluster of values, does indeed positively affect firm performance. What is certain is that some values of corporate governance have individually been associated with high firm performance by some studies. Most empirical research reports emanating from the U.S, for example, find no consistent relationship between corporate governance and firm performance, while similar studies in Asia report a convincing relationship between good corporate governance and firm performance. This paper assumes that the findings gap may narrow if research on this subject matter is seen to be culture-bound and this can better explain the findings gap.