Corporate governance and financial performance of listed companies: A case of an emerging market

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Abstract

Corporate financial performance (CFP) is a key benefit that comes with the adoption and implementation of a good corporate governance structure in organizations. The objective of this paper is to analyze the effect of the six (6) broad corporate governance structures (board composition, board committees, separation of CEO/chairman, size of board, number of board meetings held, and shareholder concentration) on CFP measured by ROA, ROE, EPS, and Tobin’s Q among Ghanaian companies. The target population for the study was the companies that were listed on the Ghana Stock Exchange (GSE) for the period 2015–2020 and purposive sampling methods were deployed in the sample selection. The study found that using ROA as a performance indicator, corporate governance variables affected CFP by 18.95% whilst it influenced ROE by 29.71%. Additionally, corporate governance mechanisms impacted EPS by 52.53% when it was used as a performance indicator and 18.01% when Tobin’s Q was the performance index. The paper concludes that companies that implement the corporate governance guidelines on best practices stand a better chance of enhancing CFP especially with performance targets that integrate shareholder value maximization.

Keywords: Corporate Governance, Corporate Financial Performance, Ghana Stock Exchange, Ghana, Performance Reporting

Authors’ individual contribution: Conceptualization — A.P.; Methodology — E.S.A. and A.P.; Writing — Original Draft — E.S.A. and A.P.; Writing — Review & Editing — E.S.A. and A.P.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M10, M19

Received: 20.04.2021
Accepted: 20.08.2021
Published online: 23.08.2021

How to cite this paper: Asamoah, E. S., & Puni, A. (2021). Corporate governance and financial performance of listed companies: A case of an emerging market. Corporate Governance and Sustainability Review, 5(3), 8–17. https://doi.org/10.22495/cgsrv5i3p1