Abstract
This paper examines whether and how firm performance is influenced by board practices in Ghana. The analysis shows that chief executive officer (CEO) duality has a negative impact on firm performance, evidence that supports agency theory’s position. Further analysis shows that the smaller Ghanaian board size appears to be optimal because it has a positive impact on firm performance. However, the larger non-executive director representation on the board has no impact on firm performance. Overall, these results suggest that the Ghanaian firms should be encouraged to separate the role of CEO and the board chair positions, have a board size of between eight and nine, and make good use of non-executive directors’ time in the board decision process if they are to achieve better performance.
Highlights
The role of corporate governance and in particular the board of directors cannot be underestimated in a developing country like Ghana where investor protection is weak (Klapper & Love, 2004)
This paper has examined board practices in Ghana and whether those practices have any impact on corporate performance
The analysis shows that companies in Ghana are governed by the Companies Code 1963 which determines their existence, continuity and winding-up but it gives room for other regulations, including Security and ExchangeCommission Ghana (SECG) Regulations and the Ghana Stock Exchange (GSE) Listing Rules
Summary
The role of corporate governance and in particular the board of directors cannot be underestimated in a developing country like Ghana where investor protection is weak (Klapper & Love, 2004). The country has been ranked by Forbes Magazine as the ninth worst-management economies in the world (Fisher, 2011), suggesting that firms operating in such economic environment performance may be negatively affected. These firms could benefit from the implementation of board governance to ensure effective risk management, accountability and transparency, leading to better performance compared with those firms with poor board practices.
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