Essays on Corporate Governance and Firm Performance

Abstract

Purpose: The purpose of the study is to check how Corporate Governance practices by firms are increasingly becoming a critical element of a firm’s performance and an area of great concern to all stakeholders, particularly market regulators and shareholders. Design/methodology/approach: The current work approach to conducting a review of all relevant research issues around corporate governance. Researchers have developed various indices to measure Corporate Governance by using proxies like Board size, number of independent directors, the attendance record of board members, etc. Corporate governance practices are an important tool for reducing agency costs and an effective board, a higher proportion of independent directors, a vigilant audit committee, etc. Findings: The studies have proved that corporate governance practices are more developed and associated with developed economic markets as compared to developing economies. Similarly, studies have evidenced that Corporate Governance systems and architectures are more observed in large firms whereas it is poor in small firms. Also, we highlight research work that clearly proves that Corporate Governance is better in professionally managed companies as compared to family own businesses. The current work also highlights the uniqueness of corporate governance in the banking sector. Originality: The study is quite different from the other studies done related to Corporate Governance in the market as it is an overall summary to compare the level of Corporate Governance and its impact on the market performance by comparing the corporate governance in developed and developing economies, size of the firm, ownership structure and the special case for the banking sector. Practical Implications: The work sends a very strong message to the markets (both the AMCs as well as the retail investor community) to watch out for corporate governance practices while making investment choices or decisions. Firms with a poor track record of corporate governance can be avoided while creating a portfolio and regulators need to keep a strict vigil on such firms.