Importance of Corporate Governance on Firm's Performance: A Comprehensive Analysis

Running Head: IMPORTANCE OF CORPORATE GOVERNANCE ON FIRM’S
PERFORMANCE
IMPORTANCE OF CORPORATE GOVERNANCE ON FIRM’S PERFORMANCE
Name of the Student
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Author Note

1IMPORTANCE OF CORPORATE GOVERNANCE ON FIRM’S PERFORMANCE
Table of Contents
Research Objectives...................................................................................................................2
Research Questions....................................................................................................................2
Literature Review.......................................................................................................................3
Research Methods....................................................................................................................14
Conclusion................................................................................................................................14
Reference..................................................................................................................................16

2IMPORTANCE OF CORPORATE GOVERNANCE ON FIRM’S PERFORMANCE
Research Objectives
The research on the importance of corporate governance on firm’s performance is
conducted for achieving the objectives, which includes following:
 For measuring the impact or importance of the practices of the corporate governance
on the company’s financial performance. Implementations of the standards of the
corporate governance improve the financial performance of the firm as well as it
positively influences the internal efficiency of firms (Tricker, 2015).
 For measuring the degree to which the corporate governance influences the business
organization’sperformance. Corporate governance helps in affecting the performance
of business, creating sustainable competitiveness as well as feasible business
environment for the investments and growth for the corporate as well as national
economy (McCahery, Sautner &Starks, 2016).
 For taking into considerations, the best practices in relation to corporate governance
in the business organizations,which can influences the firm’s performance. The
practices of the corporate governance help in increasing the performance of the
company (Krechovská & Procházková, 2014).
Research Questions
The development of the research can be donewith the objective of answering certain
questions, which is mentioned below:
1. How the different aspects of the corporate governance do creates the positive impact
on the company’s performance?
2. What are the reasons for which the firm’s performance is influenced by the corporate
governance?

3IMPORTANCE OF CORPORATE GOVERNANCE ON FIRM’S PERFORMANCE
3. Why it is necessary for the firms for developing and implementing effective
mechanism for corporate governance for their effective performance?
Literature Review
The concept of the corporate governance provides the deep insights about the various
aspects of the code of conduct that has to be followed by the business organizations. Hence,
because of this reason, the corporate governance has become the practices and process which
governs the business activities of the firm. The system helps in managing and controlling the
business organizations. As per many views, corporate governance is considered one of the
major means for the creation of long-run value of the business organization (McCahery,
Sautner & Starks, 2016). The principles of corporate governance help in the management and
controlling of the different operations of the business. There are certain element such as
rights of the shareholders, their equitable treatments, stakeholder’s role in corporate
governance, maintaining of the transparency by disclosure of various information,
responsibility of the members of the board of directors and the others.All these aspects have
to be taken into considerations by the management for the development of the corporate
governance mechanism (Chan, Watson &Woodliff, 2014). The presence of the effective
mechanism of corporate governance helps in the management of the company for
establishment of the effective internal control over the accounting and financial related tasks.
The strong presence of the internal control within the organization helps in reducing the
possibility of the corporate failures because of corporate frauds and errors. The reason behind
this failures and scandal was due to the lack of the practices of the corporate governance (Al-
Najjar, 2014). This has affected the economy of the world; this has started the measures for
the implementation of the corporate governance in the organizations. Acknowledgement of
the corporate governance has helped in reducing the risk of the shareholders. This helps in
ensuring that the shareholders get the return on the investments. This has emphasized for