Essays on Corporate Governance and Firm Performance

Received: 15th April 2021 | Review: 19th October 2022 | Accepted: 16th February 2022

Volume 30, Issue-3, April 2022

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.

Keywords: Corporate Governance, Agency Theory, Agency cost, Board of Directors, Developed and Developing economies, Firm size, ownership, Firm Performance, Auditor Quality, Banks

Download View

Akın, B. (2002), ‘Küçükişletmelerdebüyümeveörgütselsorunlar, Selçuk University Karaman’
Journal of the Faculty of Economic and Administrative Sciences, 3, pp.13-27.

Aljifri, K., and Moustafa, M. (2007) ‘The Impact of Corporate Governance Mechanisms on the
Performance of UAE Firms: An Empirical Analysis’, Journal of Economic & Administrative
Sciences, Vol. 23, No. 2, (71-93).

Ang, J. S., Cole, R. A., and Lin, J. W. (2000) ‘Agency costs and ownership structure’, Journal
of Finance, 55(1), 81–106.

Arora, A., and Sharma, C. (2016) ‘Corporate governance and firm performance in developing
countries: Evidence from India’, Corporate Governance International Journal of Business in
Society, 16(2). DOI:10.1108/CG-01-2016-0018

Bathala, C.T., and Rao, R. (1995) ‘The Determinants of Board Composition: An Agency Theory
Perspective’, Managerial and Decision Economics, Vol. 16, No. 1, pp. 59-69 (11 pages).

Beck, T., and Demirguc, A. (2006) ‘Small and medium-sized enterprises: Access to finance
as a growth constraint’, Journal of Banking & Finance, 2006, vol. 30, issue 11, 2931-2943
Berle, A. A., and Means, G. C. (1932) ‘The Modern Corporation and Private Property’, New
York: Macmillan.

Blair, M. (1995) ‘Rethinking Assumptions Behind Corporate Governance’, Challenge, Vol.
38, No. 6, pp. 12-17. Taylor & Francis, Ltd.

Brown, L.D., and Caylor, M.L. (2004) ‘Corporate Governance and Firm Performance’, http://

Carsrud, A., and Cucculelli, M. (2014) ‘Family Firms, Entrepreneurship, and Economic
Development’, Journal of Small Business Management, 52(2), pp. 189–191. doi: 10.1111/

CII Family Business Network India Chapter, available at

Claessens, S., and Fan, J.P.H (2002) ‘Corporate Governance in Asia: A Survey’, International
Review of Finance,

Claessens,S., Djankov,S., and Lang, L.H.P. (2000) ‘The separation of ownership and control
in East Asian corporations’, Journal of Financial Economics, vol 58,81–112.

Cochran, A. (1981) ‘Small business mortality rates: A review of the literature’, Journal of
Small Business Management, 19(4), 50-59.

De Angelo, L.E. (1981) ‘Auditor Size and Audit Quality’, Journal of Accounting and
Economics, 3, 183-199. North-Holland Publishing Company.

Durnev, A., and Han Kim, E. (2005) ‘To Steal or Not to Steal: Firm Attributes, Legal
Environment, and Valuation’, The Journal of Finance, vol. LX, No. 3.

Eilifsen, A., Knechel, R.W., and Wallage, P. (2001) ‘Application of the Business Risk Audit
Model: A Field Study’, Accounting Horizons, 15 (3): 193–207.

Ellickson, R.C. (1998) ‘Law and Economics Discover Social Norms’, The Journal of Legal
Studies, Vol. 27, No. S2 (June 1998), pp. 537-552 (16 pages).

Faccio, M. and Lang, L.H.P. (2002) ‘The Ultimate Shareholdership of Western
European Corporations’, Journal of Financial Economics, 65, 365-395.

Fama, E.F., Jensen, M. C. (1983) ‘Separation of Ownership and Control’, The Journal of Law
& Economics, Vol. 26, No. 2, Corporations and Private Property: A Conference Sponsored by the
Hoover Institution, pp. 301-325 (25 pages).

Financial Times,1997, Extel Financial, Company Research CD-ROM #36/1997, FT,London.
Giannetti, M., and Simonov, A. (2006). Which Investors Fear Expropriation? Evidence
from Investors’ Portfolio Choices. The Journal of Finance 61(3):1507-1547. DOI:10.2139/

Gompers, P.A., Ishii, J.L., and Metrick, A. (2003) ‘Corporate Governance and Equity Prices’,
Quarterly Journal of Economics, Vol. 118, No. 1, pp. 107-155.