The Impact of Corporate Governance on Corporate Performance During The COVID19 Pandemic

This article discusses the impact of corporate governance on corporate performance during the COVID19 pandemic. It also highlights the challenges faced by corporations and their boards due to the outbreak.

The Impact of
Corporate Governance
on Corporate
Performance During
The COVID19
Pandemic

Table of Contents
The impact of corporate governance over corporate performance during COVID-19 pandemic................3
References...................................................................................................................................................7

The impact of corporate governance over corporate performance during COVID-19
pandemic
Corporate governance is a set of rules, regulations, and processes as per which company
is directed as well as controlled. It determined power, accountability to make decisions within
company. By implementation of corporate governance, it is ensured that business entity has
suitable process of decision making and all the activities are controlled in an efficient manner
with an aim to balance the interest of all stakeholders. It is a regulatory framework which
comprises a process of setting and pursue the objectives of company in reference of social,
market as well as regulatory environment. Corporate governance has a paramount impact over
corporate performance (Al-ahdal and et. al., 2020). Here, it determines the rules, regulations for
running a business entity which further put a substantial impact over performance of corporate.
Decisions which are taken through implementation of corporate governance are balanced,
effective and taken in order to maximize the interest of stakeholders. Hence, it positively affects
financial performance of business entity. Apart from this, corporate governance facilitates
effective decision making in favor of stakeholders. It increases interest of stakeholders in
business and also protects their rights & position. In addition to this, effective application of
corporate governance improves performance of firm as it brings transparency and accountability
in overall process. Here, principle of corporate governance positively affects profitability. It
helps in formulating positive reputation of brand in market that also develop competency to stand
in competitive environment for longer period of time. Corporate governance is helpful in
minimizing ambiguity and confusion among company and its stakeholders. It further develops
confidence of stakeholders in business which leads towards higher market value. In current time,
economic success of organization is not only governs with innovation, quality, creativity but
compliance of corporate governance is also paramount to maintain good financial performance
of business. It also improves internal efficiency of business entity (Ren and et. al., 2019).
COVID -19 is an infectious disease which has become an emerging issue for the whole
world. This disease is caused due to virus and easily transmits from one person to another. Due
to the ongoing pandemic, lockdown has imposed in several countries. In addition to this, strict
norms and guidelines of COVID-19 also put a negative impact over business entities.

Coronavirus is constantly spreading and seriously affecting economies as well as operations of
listed companies. Here, pandemic is not only has impact over health but it also disturbs the
whole economy and operations of corporations. It is due to the major adopted by government to
fight with this virus. Here, government has issued the order of stay at home, social distancing,
community lockdown and more. The ongoing pandemic has affected different industries across
the globe. However, impact over some industries are more severe than others. For instance,
demand of online groceries and more has increased after pandemic. On other side, some
industries like airline, hospitality industries have been collapsed. The current pandemic has also
effect on corporate governance, corporate performance, capital structure and more. It is stated
that COVID 19 has affected different characteristics of firm such as dividend level, corporate
governance, liquidity and so on (Al Farooque, Buachoom and Hoang, 2019). Managers are likely
to increase cash level of firm in order to cope up with operational risks which caused due to
COVID-19 with an aim to ensure survival of company during tough time. Whereas, board
meeting, audits are likely to affect business entity in adverse manner due to high compensation
and fees charged by directors. It put un-necessary burden on organization that is hard to afford in
such uncertain time. In order to prepare rules, norms and take decisions, meetings are arranged
while following practice of corporate governance. This practice is crucial for smooth functioning
of business and also helps in maintaining transparency within organization. In COVID- 19, it is
not possible to organize huge meetings, conferences. Due to guidelines of government,
companies have to cancel or postponed the meeting for a further deadline. China also
experienced severe impact of COVID 19. It is stated that GDP of china reduced by 6.8% in first
quarter of 2020 (Guo and Platikanov, 2019). In addition to this, pandemic also affected
performance of Stock market within country. Listed companies are foundation of economy of
country. Here, economy majorly depends on success of listed companies. However, the
performance of these companies has drastically reduced down during pandemic time.
COVID-19 pandemic has proliferated quickly due to ease of flow of trade and movement
from one country to other. In order to curb the transmission majority of counties imposed
lockdowns. Pandemic damaged business which is hard to recover and also hamper the overall
network of production. Being the largest manufacturing country China has trade relation with
majority of countries across the globe (Mathew and Sivaprasad, 2020). Here, COVID-19 affected
business entities of China in terms of productivity as well as profitability. During pandemic, it is

not easy to exchange raw material and resources with counter nations. It affected profit of large
corporate. Import and export is regarded as the major activities of large & multinational
corporations. Due to impact of COVID- 19, corporations are not able to perform the activities
related to imports and exports which further affected their current level of profitability.
Corporate governance is also a significant part of business entities wherein meetings are
arranged with an aim to take effective and favorable business related decisions. In pandemic
time, it is not possible to organize such meetings. In addition to this, board members, directors
are the crucial part of this meeting and they also charge certain amount as fees. In COVID time,
it is difficult for companies to meet with their operational expenses. On the above of that, fees of
directors, managers is a burden over organization. It enhances the overall expense of business
entity that reduces down overall level of profit margin (Gong and et. al.,2021).
Pandemic is one of the influential issues in 21st century. Now, it is analyzed that it is not
merely a health related issue. Due to this, countries are facing several issues due to contagious
nature of COVID-19. Government measures such as imposing lockdown, social distancing
norms substantially affected the overall performance of corporations within China. In corporate
governance, directors play a major role by setting policies, norms which has direct link with
corporate performance (Pradhan, Ghose and Shabbiruddin., 2020). In addition to this, COVID-19
has highlighted another role of directors which is reducing uncertainty created by current crisis.
Here, executives of business are required to restructure their policies related to capital,
organizational design for meeting with emergencies related to short as well as long period of
time (Tan, 2021) . As the current pandemic disrupts different aspects of operations of an entity
so, it is the duty of board of directors to be more supportive rather only focusing on offering
typical mentorship to individuals. For instance, in absence of management team due to impact of
virus, it is the duty of board of directors to intervene in process and significantly get involve in
highly active and oversight role. It is considered that board of directors are crucial part of
business entity thus they required to be prepare in order to deal with unforeseen situation. In
COVID time, method of meeting had also been changed. Now, meetings are likely to help in
virtual manner. In addition to this, current structure of governance also might face certain
changes in terms of diversity, size of boardroom. Here, stakeholders need to cope up with
changes in order to run the business in best possible way (Sarabia, Padilla and Díaz, 2021).

Corporate governance is one of the imperative practices that is followed by majority of
corporations with an aim to run business in systematic and proper way. It is adhere with several
guidelines, norms which are structured so that business entity can function effectively.
Performance of a corporation is significantly affected by corporate governance. However,
COVID-19 outbreak has introduced several challenges to corporations as well as their boards. In
spite of this impact, board of directors still holds great importance in business performance. They
play a vital role in enhancement & enlargement of business entity. Despite analyzing impact of
COVID-19 over corporate governance, it is still believed that well-govern firms are likely to
perform well than non-govern firms (Gu and et. al., 2020). Corporate govern helps an
organization in order to connect with external environment in better way that will further help in
getting adequate amount of resources to address devastating impact of COVID crisis. It is said
that corporate governance is a crucial aspect which positively affect corporate performance.
However, COVID-19 crisis put a devastating impact over performance of a business entity
within China. Here, the negative influence can address with well-govern structure of
organization.

References
Books and journals
Al Farooque, O., Buachoom, W. and Hoang, N., 2019. Interactive effects of executive
compensation, firm performance and corporate governance: Evidence from an Asian
market. Asia Pacific Journal of Management, 36(4), pp.1111-1164.
Al-ahdal and et. al., 2020. The impact of corporate governance on financial performance of Indian
and GCC listed firms: An empirical investigation. Research in International Business and
Finance, 51, p.101083.
Gong and et. al.,2021. The zoonotic diseases, agricultural production, and impact channels:
evidence from China. Global Food Security, 28, p.100463.
Gu and et. al., 2020. How do firms respond to COVID-19? First evidence from Suzhou,
China. Emerging Markets Finance and Trade, 56(10), pp.2181-2197.
Guo, L. and Platikanov, S., 2019. Institutional ownership and corporate governance of public
companies in China. Pacific-Basin Finance Journal, 57, p.101180.
Mathew, S. and Sivaprasad, S., 2020. Corporate governance practices in the context of the
pandemic crisis. Available at SSRN 3590253.
Pradhan, S., Ghose, D. and Shabbiruddin., 2020. Present and future impact of COVID-19 in the
renewable energy sector: A case study on India. Energy Sources, Part A: Recovery,
Utilization, and Environmental Effects, pp.1-11.
Ren and et. al., 2019. Working capital management and firm performance in China. Asian Review
of Accounting.
Sarabia, P.L., Padilla, S.R. and Díaz, R.G., 2021. How Covid-19 Has Accelerated the Garment
and Financial Investment Industries’ Adoption of Environmental, Social and Corporate
Governance (ESG) Standards. In The Future of Companies in the Face of a New
Reality (pp. 37-62). Springer, Singapore.
Tan, C., 2021. The impact of COVID-19 pandemic on student learning performance from the
perspectives of community of inquiry. Corporate Governance: The International Journal
of Business in Society.