Abstract
This paper examined the effect of corporate governance structures on the market value of firms in Ghana. Quantitative data was collected on thirty-one firms listed on the Ghana Stock Exchange from 2009 to 2018 to predict the effect of corporate governance structures on the firm's market value. Panel data regression analysis revealed that corporate governance structures accounted for 84.9% of the variation of a firm's market value for the period. Furthermore, the study revealed a significant relationship between CEO duality, Non-executive director, board size and firm's profitability and value. The study concludes that firms should separate CEO position from board chairman position to enhance a firm's profitability and value.
Highlights
Corporate governance is a process by which organisations are directed, controlled and held to account to the stakeholders of firm (Guo et al, 2013)
The findings from the regression reveal that the corporate governance variables (i.e., chief executive officer (CEO), board size (Bsize) and non-executive director (NED)) affect a firm’s market value (i.e., Tobin’s Q)
The positive relationship between corporate governance variables and a firm’s market value indicates that firms with strong corporate governance structures are perceived positively by the market which reflects on the stock market prices
Summary
Corporate governance is a process by which organisations are directed, controlled and held to account to the stakeholders of firm (Guo et al, 2013). It is a formal distribution of power between three main parties: The board of directors, managers and shareholders to ensure that the decisions of management do not conflict with the shareholder interest (Ngoungo, 2012). The issue of corporate governance arises because of the separation between the ownership and management of a firm This creates a problem commonly referred to as “principal-agent” problem where management pursue their personal interest at the expense of owners’ interest. The principal-agent problems have existed since the industrial revolution, business and political leaders around the world had a re-awakening following fraudulent business manoeuvres by the former energy giant, Enron, Inc., which eventually created financial crisis in the United States of America (U.S.A)
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